Don't just rely on insurance to protect you from identity theft and card fraud. It's much better to take these precautions to prevent it happening in the first place!
If you're concerned about fraud, there are three ways to go about defending yourself from financial loss and minimising the anxiety involved in putting it right again:
1. Identity-theft insurance
A typical identity-theft insurance policy will pay for such things as rejected loan application fees and lost wages if you have to take time off work to reclaim your identity. The biggest benefit, in my opinion, is that many providers will be able to tell you what to do, who to report to, which companies to call and so on. This might be useful if you think you wouldn't keep a cool head in that situation.
2. Credit-card protection insurance
A typical credit-card protection policy will cover you for loss due to fraud up to a specified limit, perhaps £5,000. Once you have reported the loss to the insurer, the limit for any additional losses that occur after the report could rise to £50,000 or £100,000. In addition, these insurances will often cover cash that has been stolen with your cards (up to a few hundred pounds).
Other benefits can include a service that will contact all your card providers to notify them of theft and to get replacement cards re-issued. Furthermore, if, as a result of the theft, you have no money to get home, the policy will probably pay for your transport costs too. The cost of replacing documents such as your driver's licence and passport may also be covered if they go missing at the same time as your cards.
My Foolish colleague Donna Werbner recently wrote about her experience with credit-card protection insurance on her blog, after her handbag was stolen.
Are these insurances worth it?
Identity-theft and card protection insurances may particularly benefit people who are victims of fraud that is committed outside Europe, as it can sometimes be harder then to recover your money. However, I believe that identity-theft and card protection insurances are of negligible value to most people. This is because of these basic rights:
- Credit-, debit- and charge-card issuers must bear the cost of fraudulent use. In some cases you have to pay for part of the loss, but this is limited to £50. The exception is if you're grossly negligent, e.g. if you write your PIN on your card.
- If you make a purchase worth £100 to £30,000 with a credit card and you have a problem with your purchase, your credit-card issuer is equally liable to refund you. This means you can ask your credit-card company to refund your account in addition to the vendor.
This leads us to the third way to protect yourself and your money:
3. Be careful
If you're careful, the chances of suffering from fraud are very low. If you have a loss, it can take a while to fix it and get your money back, and this can be stressful. (That's an advantage to the aforementioned insurances; you can get your money back more quickly.) That's why it's best to simply be alert. We've not shared any tips on this for a while, so here are the better ones:
Documents
- Keep your cheque books separate from your credit cards.
- Keep your driver's licence separate from your keys (as your licence has your address on it).
- Keep your passport safely hidden away when travelling.
- Shred all documents with your personal or financial details, rather than bin them.
- Check bank and card statements for unfamiliar transactions
- Re-direct your post when you move and notify all companies that send you post of your new address.
- Check your credit report once in a while.
- Ignore letters that seem too good to be true; the ones that offer you money for nothing or ask for personal details.
Cards
- Report missing cards immediately.
- Don't let restaurant and shop staff take your card out of your sight, because they might clone it.
- Inform your bank if you're planning a trip abroad, so they don't get suspicious of your overseas transactions and bar your cards.
- Be paranoid about people finding out your PIN number. Try to memorise it, not write it down, and cover it up when you enter it into readers or cash machines.
- Put all your cards on a photocopier and copy both sides. Write the emergency contact numbers for each provider on the paper. Then store it somewhere secret and safe.
Computer and telephone
- As with letters, ignore dodgy calls or emails that ask for money or personal details from you.
- Don't click through links sent to you by email from your bank or any other financial organization. Often these are cleverly disguised 'phishing' attacks to lead you to fake websites, where you enter, and therefore reveal, your personal details and passwords.
- Be really careful with your passwords, and don't choose anything obvious.
- Don't give passwords to anyone who calls you, regardless of who they say they are. Find the correct number online and call them back, so you know it's not a scam.
- Make sure you see the padlock sign before you type personal details into forms on the Internet.
- To be extra, extra safe, you could stick with British-based companies you have heard of for your Internet purchases.
- Get some anti-spyware and anti-virus software. Don't be conned into buying a fake product though! Get tips from your IT buddy, or pick software you know has a good reputation. I've used Ad-Aware and Spyware Doctor for anti-spyware, but other well known packages are Norton, McAfee and Microsoft. I've used McAfee's anti-virus software too.
- Scan all attachments you receive by email for viruses.
- If you download (i.e. open or save) any files from the Internet, sve them to your computer first and then scan them. Don't just open them.
- To be extra safe, don't download files from sources you don't know and trust.
- Try and resist putting your personal details on networking sites such as Facebook for all to see.
> If you're using a credit card for purchases to benefit from the extra protection mentioned in the above article, ensure you pay it off straight away to avoid interest. You could earn money on your purchase too, with a cashback card. Alternatively, a 0% on purchases card will give you longer to pay off the balance before interest is charged.
> Read Donna Werbner's blog about her theft!